Current project status
The current status of this project is: Complete.
List of project stages:
- Analysis of responses
- Initiation: Could include discussing scope and terms of reference with lead Government Department
- Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
- Consultation: Likely to include consultation events and paper, making provisional proposals for comment
- Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
- Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations
This project is complete. Government has accepted our recommendations. Our recommended rule has been widely adopted by the trust industry
The project recommends that the trust industry adopt a non-statutory rule of practice and that this should be enforced by the regulatory and professional bodies who govern and influence trustees and the drafters of trusts. The Law Society and the Institute of Chartered Accountants in England and Wales have both introduced regulation for their members. The Society of Trust and Estate Practitioners (“STEP”) has launched a version of the rule that will bind its members in England and Wales.
The recommended rule of practice governs the disclosure and explanation of clauses in trust instruments which have the effect of limiting or excluding liability for negligence. The rule requires paid trustees to take reasonable steps to ensure that settlors understand the meaning and effect of such clauses before including them in trust instruments. The Report recommends that the drafters of trusts should also be subject to the rule.
The Law Commission’s approach was welcomed by the Better Regulation Executive who stated: “With complex and important issues such as trustee exemption clauses it is all too easy to play it safe and legislate. I’m glad to see that the Law Commission has listened to people on all sides of the debate and developed a proportionate risk-based approach to the issue.”
On 19 July 2006 we published our recommendations in a report. The report was launched at an event held in the House of Lords at which the Lord Chancellor and Law Commissioner Stuart Bridge both spoke.
Our report was based on a consulation exercise we conducted in 2003. We received 118 responses to ourconsultation paper, including a detailed paper from a Working Group of the Financial Markets Law Committee on the impact of the provisional proposals on trusts in financial markets.
In a statement from the Ministry of Justice on 14/09/10, the Government accepted the recommendations in our 2006 report (LC301).
Area of law
Property, family and trust law